Monthly Archives: February 2013

A permanent addition to the library, a set of specific UK Shale Well Guidelines hot off the keyboard from the UK Onshore Operators Group.

Ken Cronin, Chief Executive of UKOOG said “We have a strong regulatory environment in the UK, it is therefore important that the industry adopts the highest possible standards with respect to well integrity and fracturing operations. The publication of these guidelines demonstrates a commitment to comply with relevant legislation and best practice“.

Energy Minister John Hayes commented: “Shale gas is an exciting opportunity and could contribute significantly to our energy security. It is important that any development is safe and the public must be reassured that it is safe. I welcome these guidelines, which complement our robust regulatory system to ensure all operations are carried out to the highest possible standards and the environment is fully protected.”

Natural gas pricing is a complex subject tied to seemingly unconnected multiple variables that simply don’t lend themselves to a simple narrative. That doesn’t stop most people trying to create one. If they want a simple life, these people should get out of the big money and go open a laundromat or something. Natural gas pricing is a high impact multi-billion dollar issue. This may explain why those who go for the natural gas is just another fossil fuel narrative just can’t get gas pricing either. Their Peak Gas narrative is essentially we’re all using a lot of a declining resource and we’re doomed, or if we stop we’re doomed anyway or we can get out of it spending a trillion euros to go green. In which case we’re doomed and broke. As an aside, peakers are often as unaware of, and uncomfortable with, the success of energy efficiency on the demand side as they are with shale on the supply side, denying the good news reality of each.

A key issue in Europe remains that some continue to refuse to accept that the shale revolution will have consequences in European markets.

Under this scenario, European shale gas won’t evolve for a variety of reasons and the comfortable world of rising gas prices that underpins European energy policy in other areas will remain intact.

Tuesday, Alistair Buchanan told us that the lights were going out, and that shale gas wouldn’t help us out.

Unlike in the U.S., shale gas is not going to contribute significantly in Britain or elsewhere in Europe, he added, leaving Britain prone to competing for liquefied natural gas (LNG) in the global market.

The overall speech was nowhere near as catastrophic as the media pointed out, but it’s unlikely the media can sit through 72 slides of anything, let alone those of Buchanan. On the plus side he pointed out that gas will provide the only option to keep the lights on. That was the key takeaway and early on in the slides, conveniently ignored by those who wanted to concentrate on Buchanan’s recycling of one old myth that Asia and Europe would battle it out for dwindling LNG supplies, and the creation of a new one where shale gas in Europe wasn’t going to have any impact.

Buchanan, luckily for consumers, is taking retirement in June. How long until he turns up on the board or in a senior position on one of the companies he regulates? Perhaps a long cruise and he’ll be back by this time next year. It would be the least surprising news since Louis Renault found out there was gambling at Rick’s.

First the good news on shale this week, because you certainly won’t find this in any of the UK press.

Richard Branson is the brand name billionaire in the UK and the world’s richest hippy. For one example he has 2.9 million more twitter followers than I do which is almost twice the combined circulation of the alleged quality newspapers (Times, Telegraph, Guardian, Independent and FT) . He’s not really my type of guy, but he seems nice enough for a billionaire. In short he’s just as famous, equally as ubiquitous but only a tenth as obnoxious as Donald Trump. For example this week he was in the press for promising to give away half his money:

In their pledge letter, Sir Richard and his wife Joan said they wanted to use cash from the company to create ‘a healthy, equitable and peaceful world for future generations to enjoy.’

The above is just one example of how often he pitches up in the press, since he’s as tireless a self-promoter as one can get. But when it comes to shale gas, Branson is like the rest of us. In the UK we have shale gas opponents who get votes by tens and lose their deposits in elections given national media coverage.

Philip Mitchell, a member of the Blackpool and Fylde Green Party, said he also has serious concerns about the dangers of air pollution.

But support shale? Jesus Christ himself, to which Branson cultivates a resemblance, could promote shale gas, but even he would only find an audience at his own blog and get ignored in the rest of the press. I don’t usually requote in full, but since he needs all the help he can get, I’m happy to oblige:

Recent conversations with UK and European environmentalists lead me to think opposition to natural gas is not as monolithic, and that being so, as powerful as some fear, hope or believe depending on your point of view. We’ve seen several hints of that in the press, most tellingly a positive piece in the UK Guardian this weekend. I would also commend both sides of the Economist debate on shale, recently concluded to a virtual dead heat.

The natural gas industry fears opposition. Too many companies are not being pro-active in promoting their product. Counter productively, some proponents of natural gas fall into the trap of thinking the natural gas revolution is a battle. It needs civilised discussion on all sides. This is especially so outside the United States, where natural gas resources belong to everyone via state control or ownership. Common ownership makes onshore gas different, but not worse, and in several ways it could provide an advantage. Accessing resources – or not – is a discussion for all stakeholders.

Coal, nuclear and Russia, amongst several others, hope that gas opponents, who they would often oppose themselves, will be able to stop or fatally delay shale gas in Europe. They could never be seen to be so crass as to have commercial interest themselves, but remain perfectly happy for other opponents to achieve their ends.

Both governments and the investment community, supposedly disinterested but often invested financially if not emotionally in other solutions, are influenced to believeshale gas is so problematic it can have no immediate or near term effect.

Two recent government studies on air pollution from shale gas extraction contradict the many charges that shale gas contributes to air pollution. Let me point out that this isn’t anything to do with the methane leakage issue, this concerns the air pollution from rigs, trucks and compressor stations. Obviously once drilling and fracking cease, the majority of the problem ceases. Contrary to popular opinion, wells are generally short lived operations measured in weeks and fracking takes hours for each stage, not the permanent scourge some fear.

Pennsylvania first states how small a role natural gas development plays:

“The data show that emissions from drilling represent a small fraction of air pollution in the state”.

The actual figures showed production of shale gas was responsible for four percent of state-wide pollution. The even better news was that total pollution was down because coal fired generation was down.

By the way, before we obsess about four per cent, consider that although I can’t find the exact figures, an important source of air pollution, enough to have a huge web site on the subject, are dry cleaners. How come I’ve never read a Guardian or BBC Environment story about “controversial” dry cleaning?

Meanwhile, Colorado is another favourite target of those who paint shale as polluter.

Some interesting figures from an AJ Lucas filing with the Australian Stock Exchange. AJ Lucas are one of the owners of Cuadrilla Resources and the only ones required under securities laws to say something in public.

The doubters will say of course, that they would say this anyway, but it gives a chance for the press to do something like journalists used to do, more in depth analysis over the potential for UK shale gas and the ramifications for the rest of the energy sector. A chance that they will ignore going on past form. That’s a shame because AJL, like Cuadrilla themselves are a bit more forthcoming than in the past and coming off the fence about the potential for the shale. Cynics would say they may just be putting the best show on things, but one has to understand that potential investors have seen all this before. For example on page 2,

A transaction will be indicative of independent arm’s length early stage valuation of the asset.

My emphasis here, page 3:

The Bowland Project

The UK’s largest and most advanced shale play200 TCF OGIP announced: Largest single gas accumulation in Europe

First shale gas came for coal. Then it came for nuclear as we’ve seen not only future but existing plants are being taken off line in the US recently. Tomorrow, even the eternal debate about UK nuclear power will be blamed on shale. It sometimes seems that the only thing people know about shale gas is that they hate it.

Nuclear power is something the green movement in the UK were all against so many years ago, but now almost only the Friends of the Earth are left as opponents. Much of the rest of the glowing green movement is more pragmatic. This new practicality is still absent in the European debate about natural gas, the only technology that actually delivers significantly lower emissions instead of endlessly talking about them.

Meanwhile, shale gas and oil is delivering another victory to the Green movement, not that we’ll get any credit. Shale gas is the Rodney Dangerfield energy source.

Even before that evil fracking came to pass, the green movement was united, or as united as it was likely to get, over what was often called, and quite rightly in my opinion, extreme energy. Extreme energy was almost always oil. he objection was accessing oil in pristine environments and the top two targets have been oil in the Arctic offshore and Canadian Tar Sands.

Jonathan Stern of Oxford Institute of Energy Studies pointed out to me recently that several big players in the European gas industry consistently predict shale gas won’t have any major impact in Europe for at least ten years. This widely held view has been echoed by The Economist recently and a subsequent Washington Post blog.

Britain could have enough shale gas to heat every home for 1,500 years, according to new estimates that suggest reserves are 200 times greater than experts previously believed. The British Geological Survey is understood to have increased dramatically its official estimate of the amount of shale gas to between 1,300 trillion and 1,700 trillion cubic feet, dwarfing its previous estimate of 5.3 trillion cubic feet.

According to industry sources, the revised estimates will be published by the Government next month, fueling hopes that new “fracking” techniques to capture trapped resources will result in cheaper energy bills.

It is thought that it will be technically possible to recover up to a fifth of this gas, making Britain’s shale rocks potentially as bountiful as those in the US. Experts stressed that it was still much too early to say how much of the gas it would be economic to get out of the ground to heat homes and help to generate electricity.

BTW, I won’t comment on the figures until they’re published, except to point out that Cuadrilla’s 200TCF estimate of October 2011 is game changing enough by itself. Those figures were described as “ludicrous” by Damian Carrington of the Guardian at the time, seeking as always, rationale for full green steam ahead. Arguing today whether they are over 700 or 1700 TCF is dealing with numbers so huge as to be meaningless. Wanting to access them or not based on something so completely petty as gas bills is pathetic.

The Unconventional GasConference last week in Vienna provided solutions to the issues the conventional wisdom at the European Gas Conference were seeing as problems. Too bad they didn’t cross the hall that often, here’s some of what they missed.

Mark Sundland of Anadarko, a company which only entered shale in 2009, provided an update on what is happening now in the US. This is what gas could look like, with many of the problems having solutions. One eye opening statistic was that they were now drilling wells in less than six days. Mark and other speakers highlighted how US shale is far more abundant, affordable and efficient than the models some investors use to determine shale profitability. Too much of European thinking is based on what happened in the US in the past as model. Europe has the advantage of backwardness. We’ll have faster drills, with faster drill bits, using less power, less water, less chemicals and less money.